consumer products. >> we're talking about the watch real quick. where do you land on apple these days? >> i don't think the watch is the future of computing. >> is apple the future of technology? >> i think -- i think there's going to be a lot of companies, including snapchat, who can take over many of these types of consumer products. >> thank you. thank you for being here. a lot of fun to see you. >> it's great. >> make sure you join us tomorrow for ouring about d.c. show. "squawk on the street" is next. ♪ good tuesday morning and welcome to "squawk on the street." premarket study this morning as the dow comes off its tenth record close since election day, busy morning of earnings and macro data. european stocks mostly in the black as renzi now says he will stay until a budget is passed. oil is lower, don't forget some

inventories coming our way tonight. we begin with how the carrier deal went down. greg hayes spoke exclusively to jim and we have all the highlights. >> amazon's ambitious plans to take over the grocery business and your job. details on the company's vision to expand beyond e-commerce. and bank of america ceo on the record. an exclusive interview right here this hour. but first up, donald trump tweeting a few moments ago that boeing is building a brand new 747 air force one for future presidents, but in his words the costs are out of control. more than $4 billion. as he says, cancel order. jim, it seems like every big cap company has their turn, and today it's boeing's. >> okay. well, i don't want to tell president-elect trump what to do, but i'll tell him what to do. there are a lot of a-380s available right now because this happens to be a plane that is in excess supply. there could be a 380 -- oops, it's a european plane.

but it's ready to go and it's got united technologies engines so, you know, you lose the carrier business, at least a phone call, you pick up maybe this is what happens. maybe this is the art of the deal, because i've got to tell you the 380, we don't even know what to do with them or they don't. >> wait a second. the united states president is going to be flying around in an airbus? >> i just thought if you want to save money. the 380 is available for sale. >> that is not going to happen. >> then you're going to have to go to boeing and say, listen, we're going to pay a lot less and that's probably what does happen. but sometimes you get to a level where it's difficult to really get your way because there's only two companies that make wide bodies and they are very much for sale. i have to tell you, i don't know if u.s. -- did you ever have a used plane? there are so many used planes for sale in the wide body right now. you could make a deal. say i'd rather buy one with a good warranty. i bought a car with a really good warranty that was used and saved a fortune.

or is that probably not what you -- >> you know, this tweet just a few minutes ago, of course you can see the time stamp on it, 8:52 i think that says. we haven't had an opportunity to take a look at this program, if you want to call it that. but the most recent press here, i think it's reuters, the air force has said it earmarked $1.65 billion for two replacement jets so i'm not clear where the $4 billion number is coming from unless he's sharing something he knows and we don't. >> boeing does a huge amount of defense contract business, all right? there's a lot of guys make a lot of stuff boeing makes and a lot of disputed contracts. if i'm the head of boeing, i would say -- because i'm going to get the call probably, what, the week before christmas? i would absolutely say, you know what mr. president-elect, let's make a deal. a deal that i will not refuse. >> the other question is why this tweet now, what was on his mind. what is coming up --

>> and is it a coincidence that the two companies being talked about by him have -- are companies with which the government has leverage through contracts? >> how about the ex-im bag. export/import. what it looks like is that this president-elect realizes that he has what i call leverage. and if you're boeing, you're not really in shape to be able to say, you know what, mr. president-elect, sorry, take it or leave it because then he can say, you know what, we have a big order that's making tankers that refill in the air. >> i guess. i feel like we have a lot more questions than answers, as usual. >> but i'm just saying the tweet has become the way it gets done. >> you know who we have with us, phil lebeau -- >> he can give us some answers. >> can he go more than 140 characters? >> phil, good morning to you. do you want to walk us through what this may mean? >> well, we've got a call into boeing and we have asked boeing

for a response. what's interesting is when i called boeing this morning, i said the president-elect has tweeted about your company and we would like an official comment on this. there was sort of a pause and a, okay, we'll get back to you. i think that says it all right there. couple of things to keep in mind. i'm curious about this $4 billion cost. david brought up, what did you see? >> $1.65 for two replacement jets. >> correct. >> that's the most recent press i've seen a couple of weeks ago. >> if you were to go out on the market, david, and you went to boeing and you said i want a brand new 747-8, it's about $345, $348 million. that's a commercial one. clearly what you need to take into account are all of the technologies and important elements of an air force one that is incorporated into that plane. many moons ago i had the good fortune of working in wichita, kansas, where boeing was building the current air force

one. and we had a chance to go on it as they were finishing it and as they were showing us some of the technologies. i'm not sure people fully appreciate that you basically have a flying oval office. and that means you've got a situation room inside the air force one. all of the technologies that are needed to go into that airplane, i mean -- i'm not justifying cost overruns, but it is incredibly expensive. and so i'm curious where this $4 billion number comes from that president-elect trump is tweeting out because that $1.65 billion, that's the number that i have -- most recent number that i have seen, david. we've got a call into boeing to get some answers from them as well. just for some people to keep this into perspective, this is not just a plane that flies the president around, it is a plane, and we saw it on 9/11, where you want the president to have all of the capabilities at his fingertips, him and his staff. that's what you get with the air force one. >> phil, i spent a lot of time

yesterday with greg hayes, the ceo of united technologies, owns carrier, and the president-elect never mentioned in that prethanksgiving phone call that united technologies does $6 billion with the government in federal contracts. but he said i was born at night but not last night and making it very clear in his own colloquial way obviously there's a little bit more at stake. do you think it's just the president-elect just saying, you know what, i like to bargain here. the defense, the front page of "the washington post" says there's big defense overruns. maybe i can play a role and say listen, guys, let's do a little bargaining. you know he's a bargainer. >> you're right. it's about putting a mark in the ground. you put a stake out there, it's the art of the deal. which some people in our newsroom have talked about. when you're looking at donald trump, if you take him literally at his word, you might be misunderstanding that the way he's approaching things are, hey, i'm going to make the art

of the deal, the negotiation, appear opan opening bid and i'm going to go from there. it's not lost on the people at boeing that they are a huge defense contractor. let's see where this leads, similar to what we had to see with united technologies. >> pentagon study revealing $125 billion in waste. if you're the president-elect, you've got one of two choices. you can say, wow, that's a huge bummer or you can say where do i have leverage defense contractors. the answer is i can start with a tweet. this is going to be the tweet where if you're at boeing, you say oh, darn it all, man, maybe the guy is bargaining. let's get on the phone, see if we can save a little money. next thing you know president-elect trump says, hey, i'm not part of the problem, i'm part of the solution. nobody gets away with waste over time. now, we know that the world is a strange place -- new place, new place, not strange. but maybe he reads the paper and says i'm going to do something. >> that's definitely a

possibility, jim. i don't think there's any doubt. and you're right, it is about leverage. he can say, look, i know what i'm going to need as far as flying around as a president and what future presidents will need. $4 billion is outrageous. now, put aside the fact that we're not sure where he got the $4 billion from because if it's hyperinflated and he just threw that number out there and the reality is $1.6 billion, maybe he can bring that down a little bit, so you're right. this is all about having that leverage and making that first mark out there inspect terms of negotiating and saying, you know what shall i think there's too much waste in washington, i'm going to do something about it. >> i thought the competition for marine one was interesting. this is doubly so. phil, thanks for that. phil lebeau bringing us up to speed on the boeing situation. speaking of greg hayes, he talked to jim last night on "mad money" exclusively about the company's deal with president-elect trump to keep jobs at that carrier indiana plant. take a listen. >> there's no give without a get, we all know this.

he'd like you to rethink it but at the same time everybody is going to get those benefits that you talk about. we hear about this $700,000 incentive, but that's obviously much less than you would have saved. >> so there was a cost, as we thought about keeping the indiana plant open. at the same time, and i'll tell you this because you and i, we know each other, but i was born at night but not last night. i also know that about 10% of our revenue comes from the u.s. government and i know that a better regulatory environment, a lower tax rate can eventually help utc over the long run. and so we weighed all of those things in making the decision with the board -- >> but you weighed it. the president-elect did not say, greg, have you seen how many engines that we buy from you? it did not come up. >> it did not come up nor is there any i would say deal. there was no quid pro quo for him to say, look, i'm not going to tax if you don't do this. he simply said take a hard look at it. >> that segment was dissected a

lot last night, no quid pro quo, but he recognizes the environment, right? >> and i think greg hayes is a straight shooter. i don't think it ever came up because it didn't need to come up. i don't think this tweet to boeing is idle. look, these things are -- a lot of people feel like that the president-elect is totally spontaneous, that this is about like alec baldwin "saturday night live." these are not spontaneous. the pentagon study that reveals that there's $125 billion in waste, the president and previous administrations who have seen waste in the military have been handcuffed, they just throw their hands up. >> you're going back to the thousand dollar hammer. >> going back to eisenhower. the military industrial complex in his go away speech. i'm saying that with the tweet, the president-elect has kind of set a new tone which is, you know what, i'm not going to take the waste anymore. i'm not going to say it's the department of defense, i'm not going to say it's the way it does business. is that a thought-out way to do it?

well, who cares. i've got to tell you boeing right now, someone at boeing, some bean counter is going, you know, we were thinking about cutting that price for those planes. >> there has got to be a lot of other contracts boeing has with the department of defense beyond this one, i would think. >> tons. >> so why are you taking a shot at this? >> well, because i think that you look at what you're charging the government and you think, well, maybe we don't want to lose that order, whatever orders are currently in the pipeline. >> no, i understand that. we can sit here speculating, and we probably will be very often during this presidency. what trump really means. >> maybe it's some sort of pivot dance around china on in a here when xi jinping is going to go to davos and become the leader. >> there's no other guy that's going to make the 747. if you're boeing you've got to think we've got to sit down with

the president and let's make a deal. >> so did hayes give you any insight as to what that actually looks like when you sit down and you make a deal? >> i think that the insight that i got is that they're one side that has a lot more leverage than the other and it's not the side that happens to be located in connecticut and is a big defense contractor and needs those contracts in order to make the numbers. remember, a lot of what we do about boeing is we think, okay, how well are they doing? boeing stock is down here. the president-elect actually follows the stock market too. you know, president obama was not as attuned to business. the fact is, is that boeing has to accept the fact this is a new world. maybe they were -- maybe this thing has gone too much of an overrun and maybe we've got to eat some of the overrun. i remember when they used to look at what was going on in our gigantic aircraft nuclear program with president carter.

he was very upset about how much the overruns cost because he was afraid the navy would say, listen, we're going to order fewer carriers. he didn't want that to happen. he spent more time talking about the costs than anybody. if you're right now someone who is an air force -- the head of the air force, you might say you know what, mr. president-elect, i see ways to cut back if this doesn't go your way. look, i'm just telling you the way it's worked. >> you're going very deep into sort of a well thought-out plan here. whereas i would come back with maybe it just sort of struck him and it's like, you know what, this is ridiculous. >> if you add it up, i might have done like 1670 characters. i mean that's just a lot of characters. more than twitter can imagine. >> the other thing hayes talked with you about last night was automation. even for the plants that they're keeping in this country, investing in in this country, take a listen to this. >> we're going to make a $16 million investment in that factory in indianapolis to auto

mate and drive the cost down so we can continue to be competitive. is it as cheap as moving to mexico with lower cost labor, no. we will make that plant competitive because we'll make capital investments. what that also means is there will be fewer jobs. >> the amazon news yesterday, the end of jobs, a supermarket with no cashiers. >> $8 an hour, thousands of jobs at stake and how do you compete with that. i think you have to say maybe i've got to go to that technology too. kevin johnson comes in as head of starbucks. they have to make the technology. they use ten times the number of people on that assembly line versus a few years ago. david, look, you can't -- unless you're smashing the loons, this is the way of the world. >> it is. and the post could have put an uber from pittsburgh that's driving around on its own. right now you can get an uber in pittsburgh that's got a person in it and they're not driving. >> eventually there will be no

person. >> and there will be no person. so they could have put that on the cover. and there's probably more people driving than cashiers although either one is very close and very large employment. this is the future and there's no way the president will do anything about it. >> do you have the favor.com app? it interviews nelson peltz and gets everything you got and does it quicker and better in a sound bite. >> but the hair is nowhere near as good. >> thank heavens. oh, my god, i'm dead. the cramer app. >> you have other talents that are not rep lickable. >> elon musk did not call me a simulation for nothing. andrew sorkin has already replaced me. what a run-up for bank of america, surging more than 30% in the last month. brian moynihan on the road ahead and what he'd like to see from a trump presidency. that's coming up this hour. one more look at the premarket and more "squawk on the street"

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let's get to the bond pits this morning. rick santelli is at the cme in chicago. good morning, rick. >> good morning, carl.

you know, the markets are getting back their sea legs post referendum, post election but this week we do have the ecb. one week chart of ten-year consolidating, spending a lot the in the 2.36 to 2.38 area. bund deals consolidating in the mid-30s. you may want to pay close attention to the 35 basis point but the minus 70 basis point two-year note as the meeting gets closer and post meeting especially. the gilts have risen a lot, maybe slipping a hit. now let's go to a year-to-date chart. we need to open up it for the japanese ten-year, the jgbs because believe it or not a positive 5 basis points is a whopper of a sell-off when you look at this is the highest yield closing level since february. if we want to stick with the theme, let's look at the italian ten-year that traded up as high as the low 2 teens on the high

yields, but right now around 1.95 as it slips a bit after of course the referendum. and let's switch gears. i look up and see the dollar index up a little less than a third of a cent. it's had a three-day slide. in december 10, 2015, you see the top end traders are looking at. if you open it up to a four-year, the real money ball trade was almost violated but stopped at 1.0506 as the early referendum returns came out. when we come back, we'll get cramer's mad dash and stay tuned for an exclusive interview with b of a's brian moynihan. one more look at the premarket here and more "squawk on the street" continues after the break.

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ask your doctor about cialis. oh, it's so exciting, it's a tuesday. we've got six minutes before the opening bell and i get to be here with you for a mad dash. >> first what i'm about -- i have to preface what i'm saying. the conference call is usually very important, but toll brothers reported today, david. i like what you said when you back out all of the charged, you've got $1.05 versus 99. they bought back 8% of their stock this fiscal year. the order dprogrowth is looking very, very big. backlog 14%, up in orders. my point is, is that this group

has been in hades. >> isn't it all about renting these days, not owning? you see blackstone is going to bring their huge portfolio of homes they bought that they rent public. >> but this is a luxury home builder. and what this says is, is that a little bit of animal spirits, this group has been horrendous. the only one that's been up is kb homes and that's because it's got great takeover prospects. up over 20% because they own land in san francisco. what does a starter home go for in san francisco? >> over a million bucks. >> that's why my daughter is staying in oregon because it's a little cheaper up there. i've got to tell you, david, if this lasts there's a lot of pin action off of it. the housing economy is 10% but it punches above its weight. let's not forget that. >> we'll watch that sector and a lot of others. >> get off my plane! air force one. >> oh, man. all right. we've got the opening bell coming up. also a live interview with the

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you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in just over a minute's time. busy morning. already got q-3 productivity which came in a little better than expected, best number since 2014. looking at oil, down more than a dollar. some expectations that the actual cut may not be quite what opec has promised. >> there's another meeting coming in and i know that when you look at it, there are holes. i've got a guy on tonight on "mad money" who has effectively looked at how much is the deal real. i mean there's some countries that can't produce more, there are other countries that can. will they cheat? there obviously was a surprise. you've got to be a little bullish that russia did cut back. it's funny, carl, there was a time if i heard that productivity had gone up, something that alan greenspan -- and oil is down, but why do you need a rate hike?

>> we'll talk to brian moynihan in just a few moments. the dow is up 16 of 20 hanging on to a double-digit gain for the year. prior to election day only nine all year so more record closes since than higher. >> lower taxes, repatriation, more buy-backs versus a strong dollar, which has historically taken the market down, higher interest rates have taken the market down. we are still in that era where we're willing to overlook number cuts. that's pretty incredible. >> at the big board, gm marine petroleum network, over at the nasdaq fox sports and major league soccer. some discussion about the dollar's anyone ability to hold its highs of the day. the ten-year five of six days closing not at the highs. >> there is -- there is a kind of undercurrent that maybe the pound is coming back. i'm surprised the pound is so low, business is pretty good there. if the euro comes back, it will come right in time.

what you don't want is for the ceos when they start reporting in january to say, listen, you've got to take your numbers down because of the strong dollar. so a lot is in the balance here in terms of earnings. we don't talk much about earnings because last week caterpillar cut earnings and the stock went up. the short sellers don't know what to do. the holy grail of short selling is when numbers are cut, stocks go down. but numbers were cut and cap went up. what do you do? >> we're looking at dow components, ba, of course utx at one point. we'll see if he gets through the other -- >> i saw jenny remetti was added -- jamie dimon is on that. i hope trump doesn't go to disney world. it's a fortune. >> it's worth every penny.

>> and no gravovernment contrac. what if he doesn't like a long football game. >> antitrust exemption, sorry. >> it is kind of open to a lot of things. i was saying during the break that this is something that's a new world. i mean maybe you want to pay a little less for companies that are in manufacturing. manufacturing is clearly -- i'm okay with every defense contractor, that's been a red hot group. maybe that group pauses. nothing is idle. >> sure. >> certainly shoe manufacturing, nike is the worst dow component. it is the worst dow stock of the year. they say that adidas and under armour competition rolls on. >> yeah, the ceo of mr. greenberg bought 500,000 shares. a lot of people buzzing about the under armour contract for major league baseball. this remains a group that is under -- let's just say you don't own the shoe companies, you own foot locker. this is an arms race and the place where you get the arms is

footlocker. that's been a monster stock. 52-week high. everything you read is playing in their direction. what a great company. what a great company. >> we don't talk about tobacco very often. >> no, because none of us smokes. >> no, none of us smokes, thankfully. but i did want to mention philip morris international, that's a name you don't hear too often, it has a $137 billion market value. today they filed with the fda for their electronically heated tobacco product. this is the new wave of electronically heated tobacco, you know, the device -- >> what does that mean? >> the device that you use to simulate smoking that doesn't really kill you. >> is that like mayor bloomberg may not go international with his war against tobacctobacco? in other words, this is a device that is safer for the people that are smoking or the rest of the room? >> no, for you, for the person doing the smoking. >> all right. >> you know about these devices. they have been out there for a

while. >> i've never smoked a cigarette in my life. >> the journal had a good read or marlboro and how they're trying to bring some of that market share back, especially in the middle of the country. >> this is an industry that thrives on innovation. >> they call it a maude fight risk tobacco product. the fda has 60 days to determine whether to accept the application for substantive review. but this is the future for many of these companies. it has like 5% market share in japan. >> i have always liked that company. what's interesting, that that company when it was danny deveetri, the former ceo, that the breakup of the old philip morris has created more value.

>> there is talk that maybe they will get back together. >> nelson peltz, a board director of mondolese in frequent conversation with president-elect trump seemed to indicate he's got him to back off any concern of oreo production in mexico because they do have 12 plants here in the u.s. >> what about pepperidge farm? >> if he has a bad batch of chips ahoy, watch out. on tobacco, guys, quickly, b.a.t. and reynolds, we're still waiting to see if they can get to a deal. b.a.t. made that offer -- there is -- oh, we're going to dip into president-elect trump speaking in the lobby of trump tower. >> we have a lot of people coming up, great group of people, doing very well. thank you all very much.

>> sir, you tweeted about cancelling the contract about the new air force one. >> well, the plane is totally out of control. it's going to be over $4 billion. it's for air force one program. and i think it's ridiculous. i think boeing is doing a little bit of a number. we want boeing to make a lot of money, but not that much money. okay, thank you. >> taking numbers down, boeing. >> i would assume so. >> ridiculous. >> geez, you know -- >> we want them to make money but not that much money. >> they would win very big if the money comes back from the repatriation. but, you know, it's tough if you're a boeing analyst right now. do you say, you know what, i've got to take things down a little. i mean that would be -- that guy's a big buyer. >> the follow is how much money do you want them to make, right? how much money will you allow them to make? >> they're not a utility. i don't know. this is a new world, i'm trying

to get my arms around this new arm. >> every day it could be something else. there's not -- >> i don't know. welcome to the new world. we've got to be thinking at all times. by the way, twitter stock you think would become to reflect the fact it's become the paper of record. >> it's up 1% today, twitter. >> twitter? >> yeah. >> boeing, obviously there's going to be negotiation. i just wonder if the price earnings multiple for all these companies doesn't shrink a little. >> he used the $4 billion number again but we didn't have an tukt and the reporters didn't have an opportunity to ask him what that number means, given that's well beyond anything we've heard in the press for the cost of the air force one program. >> look at raytheon, they're all trading down, the defense contractors. that article in "the washington post" was one of those articles that makes you sick if you're in government. and i think that this is -- nothing is idle. that's what i keep saying with these tweets, other than

"saturday night live," i don't see much that's idle. >> others say ignore everything. >> ignore everything? >> that's tweeted, until you actually see a bill or executive order signed. >> you know, it's funny, greg hayes -- how about the phone calls? maybe i should ask greg, why didn't you just ignore that call. >> but we are in a new world here in terms of trying to figure out what the administration -- i mean when you have a president who's going to say things like doing a number on us and tweet things, there are ramifications to the statements at least that are going to be taken that way by the market or to carl's point, is everybody just going to say, you know what, we're not going to react until we actually see formative policy that addresses these things. >> but if you're boeing, aren't you right now trying to figure out whether you can make a plane -- maybe give a discount to the president? >> i don't know. no. i'm going to wait until i at least get the phone call. >> well, okay. on line 1, president-elect

donald trump on line 1. what do you do? the lockheeds coming down, they're all coming down because of the overruns. i think the overruns are something the american people don't want. >> the dow is down 12. we want to save time for moynihan after this so let's get to bob pa saun pisani on the fl. >> banks, industrial its, materials, banks are holding up, industrials and materials and energy down. oil back down around $50. take a look at some of the big energy names. most of them down 2% or 3%. i think the key is they're trying to find stability because we don't know where oil is right now. a little on the other side of $50 is where it's been recently. as you can see it hitting 50, you can see these stocks moving to the downside, so 50 seems to be the dividing line right now. jim was talking about toll brothers. it's very simple, you get higher prices, you get higher sales, revenues go up.

toll brothers insists they're going to stay in that middle luxury market. we continue to produce impressive results by serving what we believe is a demographic sweet spot in the market. we are not focused on super luxury. where i grew up and my father sold hoemes, a half million to million dollar is luxury but not super luxury. the big debate into monday is can the rally continue. the good news of course is that we are in a seasonally strong period. there's no sign of real distribution, no signs people are trying to get out of their positions or take profits. the big debate is should 2017 earnings estimates be raised. here's the problem, they already had had been raised by a number of analysts prior to the election and there's a big debate should they raise them more. bank of america upgraded the price target on united continental. they said bookings had been

improving. you get passenger revenues have grown with naum nan gdp. you get 3% gdp growth, you can get 3% revenue growth. that's pretty simple but it's based on the idea the economy is going and the whole trump idea of lower taxes and lower regulations will be a difference to gdp growth. there's assumptions embedded in these orders here. they added delta to their u.s. one list. take a look at the airlines today. and remember some of these like united has been up almost 20% on the year already. should they keep raising the price targets? they did raise the price targets. united was raised to $85 from $67. it passed their own price target. now they have a $85 price target on it. haven't changed the numbers, but that's next. you can see where we're going here. so a lot of people are saying we ought to pause right now because we can't figure out the numbers. so nomura says the risk-asset rally may be halting now as speculative investors have finished adjusting their

trump-rally positions. we need to figure out a little better where the numbers are. some analysts think they should be raised, some analysts disagree on that. big debate going on on the street. dow is down 18. carl, back to you. as you probably know, financials have been the biggest gainer since the election. will fred frost is with brian moynihan this morning. hey, wilf. >> yes, indeed i'm with brian moynihan, the ceo of bank of america. thanks for joining us. before we get into the meat of bank of america, i just want to ask you to react to that clip we just watched of donald trump specifically mentioning, criticizing one company, boeing in this instance. we saw direct negotiations from the president with carrier and utx last week. are you prepared for that to happen for bank of america, direct president to ceo negotiations? what do you think of that sort of management style from the president? >> i think the management style, the involvement i think people welcome just because it means

things will happen but it's not new. we had an episode five years ago where the president of the united states criticized us for charging a fee and things, so it's not new for it to be reflected upon. with banks it's a little different because with a regulatory environment you have a different set of people with you at all times. so it's new but i don't think it's as new as people think. i think it will play out based on what will really happen. >> let's talk about that regulatory environment, and specifically dodd-frank. jamie dimon just talking downstairs moments ago said we're not asking for a wholesale change to dodd-frank, but it's always rational to look at these things again. what's your take on deregulation that's likely under donald trump president-elect and what jamie dimon just said? >> i think jamie and the group of ceos that work in the industry, we all -- we all look back at what went right and went wrong in the late 2006, '07, '08. so adding capital, adding

liquidity, those are all good things. the ceos who run these companies, large, medium size or big all believe in that. so what we're seeing saying is let's go back to where we have these problems and people outside our industry that are doing things that the industry has to clean up. let's go back to doing it. we made those changes a long time ago. and so there's a lot of debate about what the right course forward is, but the clear thing is let's be careful about it because we're self-interested as an industry. we have an obligation through the fdic to pay the cost of cleanup and so we want reasonable regulation and we think it's appropriate. >> so we're not expecting a wholesale change in the regulation, yet your stock is up 29% since the election, a meteoric rise in such a short space of time. is that justified, that move. is donald trump really that good for bank of america? >> if you think about two parts in time. if you take our third quarter results and you saw the fundamentals coming through for another quarter, the expenses continuing to be managed down, the revenue is lifting, the

activity coming through and the issues in the past that it cut up our earnings all behind us, so i think that was a good base. we were up almost 8%, 10% leading into the election. it focused people on a few things, faster growth, that's good for bank of america. and investors in particular were skeptical of the issue that every time we think our industry across the regulatory threshold got to the hurdle rates on capital there was another hurdle placed in front of them. i think the investors have been responding thinking that won't happen with adds much volume as before and therefore we can start to get to the capital and release it back to the shareholders, make more loans an help drive that economy. if you think about those things, it's no surprise we've pushed up hard. >> one other area that has been less spoken about in the last couple of weeks but i've heard a lot today at the conference, which is the prospect for more m & a, particular lly when you consider the chance of foreign cash being brought back into the

u.s. is that something you're increasingly positive about, that pick up significantly next year? >> i think our people ting we'll see more m & a. as bank of america, we can't do an acquisition, you can't do it in the united states. but as a provider to services of other companies, the animal spirits so called, the view of people saying, hey, i think i can see forward with more duration, i can understand it, and also we're still in a low growth environment. one of the ways m & a helps you is to consolidate companies and get synergies out of them in low growth environments. the top line growth for big companies largely exceeding the gdp growth is hard, so therefore they'll be looking at more ways to create more value for their shareholders so that's absolutely right. in our industry in banking, it's not relevant to us as a principle. >> brian, we've got a question or two from the studio. jim cramer coming up next. my apologies. >> couple of things, brian. as rates go up, i know it's terrific for bank of america.

two if we get rate hikes, it's great. also oil has come up. i know you talked about loans that you had that were criticized but maybe they come back. is this one of the moments that the reason the stock is well in advance of its book value is that you've got tailwinds galore? >> jim, i think that's right. i think you've got to juxtapose that against the headwinds that we'd had over the last several quarters and years where we had cleaning up legacy issues. you know, things -- the economy was considered to be lower growth and the issue was it would be even lower growth and rates seemed to be going nowhere. so you reverse that and they're all tailwinds. you reverse that and grass hassle full produced tailwinds instead of headwinds. >> we know all about your investment in technology in recent years. is that something you're really seeing the benefits of now with the investment behind you and the benefits to come? how many more stores, branches right it allow you to close over the next three or four years? >> when we think about

technology investments, thinking along a couple of categories. one is better products for consumers and customers, commercial customers and investing customers. the second is productivity. productivity has two broad strengths to it. people can do more and the second is largely around firks of operating a platform, so less data centers, less architecture around that, the way you develop and stuff. we're making gains in all those areas. if you think about in our computer backbone, the cloud for our company, the internal cloud, we've taken out about four or $500 million in savings and expect to take it out a year the next several years by continuing to consolidate data centers. so there's just a lot of room ahead of us. there's basic paper to electronic. we still have a lot of paper. cash to move around our company is $5 billion. the minute we move a payment to electronic, we save some small portion of that. you just have to do it over and over. so technology to make that happen. never forget on the front end,

it's better future functionality for the customers and that's what we're driving. >> we talked about the some of the tailwinds and jim mentioned some of that. where is that going to go, though, straight to the bottom line? is your forecast for costs the aim of $53 billion, is that target still the same or as the top line picks up will we see the cost line pick up a little bit too? >> if it picks up, it's not going to pick up. we have $53 billion, but what puts upward pressure on costs are more incentive compensation and then inflation. we have health care costs of $2 billion a year and that goes up. what you have to do is manage the rest of the costs to make that flatten out. and so if you think about it, we're saying we can go from about a 54, $55 billion run rate today to about 53. but we're talking about absorbing those inflationary costs. so you have to be able to walk and chew gum, drive the top line and at the same time bringing it to the bottom line. rate structure all moves the

bottom line basically. >> for the most part you position yourself in the recent five years and you're ready to now enjoy the tide as it gets lifted as it were? >> and the rate structure is not something we did to position the company, it's just the basic business model. we have a trillion three of deposits. they don't change when rates go up but become more valuable. your cost of fund stays down and that's been a long time coming. the fed's fund rate has been basically at 25 basis points and recently last year at this time moved to 50 so that change is very valuable. 60% of a value of a rate move is due to the front end. so we didn't decide we were going to run the company, the business model leads you here and it will produce more and fall to the bottom line going forward. >> just quickly wanted to ask you about trump's strategic policy council. were you asked to be on that as well or not? >> i'm not on it. >> there's quite a lot of goldman sachs alumni in the cabinet. jamie dimon made it on to the policy council.

is that a strategic disadvantage for you? >> we have good advocates on the council. tomorrow we have the business roundtable, in a few weeks we'll have the financial services team get together. most of the industry speaks with a single voice so we just need to get our ideas on the table about things we can do to help the real economy grow. this is what it's about, where it's the business roundtable, the chamber of commerce, the various trade groups in the financial services, how can we help the real economy grow. that is our job as a bank. so those colleagues of mine will speak for us. if we have 100 people in the room, wee not going to get a lot done so we'll make our positions known but they're very similar across the industries. >> if the referendum went against the establishment again, is that another factor that allows you to take market share in europe? >> i think europe is just a constant set of election outcomes, this one is probably less expected. but it's still less expected if you went back six months or a year ago.

we just have to be mindful of that. it continues to cause uncertainty in europe. the numbers out of germany were strong and the euro being down will help so i think this will work through. but it is a very complex system they're working through with all the different countries and all the different points of view and the election cycle preceding that we've all got to be ready for. these are all things that we have to position our company to be insulated from a really negative outcome and then just help the people through the other side of it. >> brian, a pleasure as always. thank you very much, brian moynihan of bank of america, guys. >> wilfred frost, thank you very much for that. by the way, jim, top s&p gainers since the election, b of a number one followed by jpmorgan, wells, berkshire, citi, goldman. >> i think this is very important. we're looking at a tweet about boeing. we see a phone call to greg hayes, united technologies. but what industry had been most

heckled by the previous administration. it was the banking industry. when you speak to gary cohn and take him up to the apprentice that is being played out, what you say to yourself is this industry has met the wrath of government and it's kind of now being supported, because as j jamie dimon says, look, lending is good for america. i think a president that has been a builder understands the value of it. now, that's not -- i'm not being political, i'm just saying that this is a good time for the banks and the market is not done. the market is saying, listen, the heat is off. we thought that hillary clinton was going to win, we thought elizabeth warren was going to banking, now it looks like we've got a president that's brought a lot of money from deutsche bank. they were under investigation by the justice department. this is probably even a better acting stock than a lot of others. remember when they were supposed to -- when people worried about

whether deutsche bank might go under? >> yes, i do. >> now i'm worried it might outperform the rest of the banks. think about that. this is a new world. the old world, deutsche bank is prerkd by the justice department. >> my question is whether it's any different from hillary clinton saying drug prices are outrageous in her words. >> brent saunders did say a vicious tweet from trump, the ceo of aller beg eleallergan, i we'd expect if we keep getting price increases. i think if there's another one of these epipen issues, you'll get a tweet that's heard around the world. >> we are getting some comment from boeing. let's get to phil lebeau from that. >> it's what you might expect from boeing. for now it's a no comment regarding the tweet and the comments from president-elect trump. not surprising. i think they're surveying basically the best way of responding to the president-elect. i don't get a sense that there was a phone call, as greg hayes

received a phone call a week before thanksgiving when jim was interviewing him yesterday, he talked about that. and then later we heard about, hey, i'm in discussions with united technologies. we'll have more information for you down the road. so i'll be curious to see at what point boeing says, yes, we have actually been contacted by president-elect trump or at this point if this is simply him doing what we have seen occasionally and what we talked about yesterday, him putting out on twitter, look, i'm not happy with the way a particular company is planning to operate and here's what i think should be done. so that's for now no immediate comment from boeing. >> any word on the actual costs of the program? i'm just sort of curious given the different numbers we've seen from the president-elect and what's been in print. >> right. and they're flying around. it's $1.65 billion wasser mar d -- was earmarked by the air force for development costs and that was for two air force ones.

now, you can extrapolate that and you can say if these aren't going to be built until well after 2020 and they're not expected to be in service until 2022 or 2023, it's not hard to see that the costs could go considerably higher. and we know the history of these contracts, these government contracts. they rarely come in under budget, often well over budget. so i think that might be part of the answer here, david. but the only definitive number we have is when the air force awarded this, they said we're going to set aside a budget, earmark $1.65 billion for development costs between 2016 and 2019. >> phil, thanks for the help this morning. we needed it. phil lebeau on the boeing story. we appreciate it. jim, what's on "mad" tonight. >> we're doing an oil show because i think the issue involving dakota is fronts and certain. another kind of formal opec meeting.

scott ch scott sheffield is retiring. he raised a lot of money when he had to and bought a lot of great properties. we also have therapeutics md, a company that may have something for hot flashes. and then rusty braziel has been the best predictor of oil and natural gas. i think oil should be front and center every single day. our president-elect likes to get fossil fuels out of the ground. >> we never did chip poelts. >> it's only been one year since norovirus. but if president-elect trump were to go to chipotle and say he had a good burrito, what do you think? >> i think that's worth 7%. >> he had be benefiting ackman. >> he's bigger than ackman. >> i'm trying to get my head around it. greg hayes, well, he was born in the night. >> but not last night.

>> jim, that was so good. we'll see you tonight. "mad money" 6:00 p.m. when we come back, more on boeing and trump, plus goldman's chief u.s. equity strategist david kostin on the trump rally and his outlook for 2017. the dow is down 27. who do you work for? yoyour family?rself? our financial visors are a plan to fit your family's unique needs.

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good tuesday morning and welcome back to "squawk on the street." markets down 20. it's your regular mix of earnings and macro, but this tweet from donald trump on boeing has got our attention as well. we'll watch that along with oil down 2.5%. >> and we do have some new economic data. let's get over to rick santelli in chicago with those numbers, rick. >> thank you, sara. up 0.8 on our october read on factory orders. up -- i'm sorry, up 2.7, up 0.8 when you take out transportation. now, that up 2.7, that is actually the best number going all the way back to june of 2015. if we look at the final read on durable goods orders, up 4.6. we were expecting 4.8. if you strip out transportation,

you can really see aircraft played a big role and that's a big discussion topic today, up 0.8. sequentially lower than our last look. if you take capital goods orders, nondefense, ex-aircraft up 2%. that has been a paltry area. we need that proxy for capital spending by business to ramp up a bit. if you look at orders and then compare it to shipments, shipments were actually down 0.1 of 1%. back to you. >> thank you very much, rick santelli. president-elect trump and then speaking this morning about cancelling an order with boeing for a new air force one plane. phil lebeau joins us with more on that. >> carl, that headline underneath you, that says it all. i want boeing to make some money but i don't think they should make that much. here's what donald trump had to say just a few minutes ago as he was walking into trump tower, following up on the tweet he put

out earlier this morning, suggesting that perhaps it's time to cancel the row placemec order for two air force ones. >> the plane is totally out of control. it's going to be over $4 billion for air force one program. i think it's ridiculous. i think boeing is doing a little bit of a number. we want boeing to make a lot of money, but not that much money. okay, thank you. >> so what are we looking for with the air force one project? what can the american taxpayer expect? this is the current air force one. remember, there's actually two. there's air force one and then there is the second one in case it is needed or the president and the vice president are both going someplace. anyhow, so you get two of these. the new ones are expected by 2023. when they put this out to bid, it wasn't a surprise boeing was going to win the contract. boeing has supplied the air force ones for presidents going back all the way to the start. when you look at what they're

getting, two boeing 747 planes, $1.65 billion has been budgeted through 2019 but that money is for development costs. it doesn't take long to realize that perhaps you can see some cost overruns when they actually start building the two air force one replacements, which are not expected to go in service until 2023. i have just talked with a spokesperson for boeing. no immediate comment at this point. i think the company guys is surveying how do we want to respond to this. is this going to be a public negotiation over the cost of air force one. how do we involve the air force, which is really who wrote the contract that boeing won. i'm curious if we will see further comment, a more detailed comment from boeing today or in the near future or if this is one of those where they're going to say, okay, let's sit down and talk with the air force about how we might be able to bring these costs down if we need to bring them down. >> i wonder, phil, it's probably sending chills through the entire sector.

the entire sector that you cover of aerospace and transportation, which is so dependent on government contracts. >> correct. >> per the conversation with utx and jim last night, i mean according to that ceo it wasn't brought up, that 10% of the revenues come from the government, but clearly this is something now that donald trump is bringing up. >> correct. and you will need a replacement air force one. look, the current one went into service in the early 1990s. if you wait until 2023, which is when we think you'll have the next generation come into service, i mean that's getting towards the end of the life cycle for a 747. it doesn't mean that it's going to fall out of the sky, but it's getting towards the ending of the life cycle. you don't want to wait too much longer and that's why you're seeing the development going on right now through 2019 and then they start to build it. it's not like building a regular 747. having been in wichita when they were building the previous one, the wiring, the connectivity, the technology that goes into it, i mean this is a special project that takes time and,

therefore, the added cost. now, donald trump is saying it shouldn't cost that much and that's where the negotiation begins. >> yeah. that negotiation being the operative word, phil. thanks so much, our phil lebeau. we'll have a lot more of this coming up with ambassador nicholas burns. in the meantime joining us exclusively this morning with his outlook for next yore and trump's impact on the markets is goldman sachs chief equity strategist, david kostin. good to have you back. real quickly, are you starting to think how to build that into a model, these outlying political tweets that target a company? >> well, in aggregate if we think about the market, the idea of lower taxes, the changes in the repatriation rules, bringing cash back to the united states, repurchasing shares, less regulation, those will have a larger aggregate impact on an individual basis that can have an impact on a particular company. broadly speaking, it is the

general theme of the market to focus on the hope, the opportunity set of higher corresponde corporate earnings. so our forks for operating earnings per share for 2017 is $116. most portfolio managers prefer to look at an adjusted measure and that's about $123. so start with that point, 123. all of the conversations have been about the potential, the hope of these impacts of lower corporate taxes, of more repatriation, and that those numbers of $123 could be as high as $130 a share. so $130 is what people are focusing on as a potential profit level. that is going to be the narrative between now and march. for the next four months it will be what is the upside to earnings, the potential from lower taxes. that's the hope phase. and the market should rise to around 2400, it's currently

2200, so about a 10% rise. the prospect, the potential of those higher earnings. however, if it comes in march, the issue of what about the budget deficit and how much tax cuts could be a reasonable -- will congress support and how will that negotiation, to use your observation earlier, how will that work, number one. then you have the issue of higher inflation and higher interest rates. that's your concern and more fear of what happens there. as a result, the market rises in the first quarter and then fades towards the back half at around 2300, which would be about a 5% return. >> so the hope trade gets up to 24 house a 2400 and the fear trade -- >> it brings it back to 2300, which would be about a 5% return. on a price basis, 2% for dividends give you a 7% return for the total market. >> repatriation is one of the changes we're expected to see so hundreds of billions could

potentially come from overseas back to the u.s. where do they go? are they going to get funded buybacks? >> first of all, you made reference to a tax holiday. that is what happened in 2004 when there was an option on the part of the company whether to repatriate that money. this as we can best estimate is likely to be a deemed repatriation, whereas the companies will have to pay taxes, whether or not they bring the cash back to the united states. our view is you'll probably get $200 billion of cash repatriated and three-quarters of that will be used to repurchase shares so that would be a benefit to the marketers. that's one of the drivers of going from $123 to $130? >> why three quarters for share repurchase as opposed to capital investment. >> we look at what happened in the last experience. of the money repatriated, estimates are somewhere between 60 cents and 90 cents of the cash that was brought back a decade ago was used to

repurchase shares. it can be used in any number of different sources but given the capacity utilizations around 75%, long-term average is 80%, it's not as though there's a dearth of investment -- >> no, but last time a large amount of money was used for that purpose as opposed for new investment. >> some money is used to repurchase shares. other money can be used to spend capital. the number one use of cash in the coming year is likely to be money directed toward share repurchase. only the second time in 20 years you'll see that. >> that will have exceeded cap ex. >> that's right. $150 incremental would be coming from repatriation. >> if you look at some of the biggest -- the top cash horders, apple, microsoft, a lot of these technology names that have been underperforming in this whole rally so it doesn't look like investors are willing to go there yet. >> the issue is if you're a

company and you have the bulk of your revenues domestically driven, you don't have the risk of a stronger dollar hurting your results and you don't have the risk of any potential tariffs and issue on trade, which is uncertainty. those are the benefits of why some of the companies would be a big emphasis for us. >> those who say repatriated money along with lower taxes overall will produce higher growth. if a lot is just going towards repurchasing shares, it wouldn't seem to me clear that it's going to do anything other than grow and help the compensation of ceos whose metrics are based on eps growth. >> the idea of a deemed repatriation is these companies will actually be paying a tax. so the government will get about $140 billion of incremental tax revenue they can use -- >> if they repatriate all of it. you've got -- >> it dpenlds epends on what

assumptions you have. but there will be a tax bill due on money invested overseas. if you're looking at how do you fund a capital infrastructure and fiscal stimulus, that's one of the ways you can help finance that. >> we went into this year thinking we'd get three to four rate hikes. we'll be lucky to get one. do you think we'll get four next year? what's different? >> the goldman sachs economics view is we'll have a hike on the 14th of december. so in another week and a half. then there will be three hikes next year. if we start at this point going forward 12 months, we'll have a total of four hikes. the expectation is you'll have higher inflation. you're seeing that in some of the wage indicators, some of the housing metrics. health care metrics suggests that there is inflation. that's one issue. and you have a higher rate. the tips market is pricing something on the order of 2% annualized inflation for the next decade. so that's come up a reasonable amount and interest rates are up about a hundred basis points

over the last -- since july. >> you've been here for the past year talking margins, focusing on companies that are driving margin growth. is this still going to remain a key dynamic? >> one of the complicating factors is the whole tax rate and the big source of debate in my conversations with goldman sachs clients is what are the -- what's the appropriate or what's the reasonable tax rate to be assuming for next year and the year after. how do we want to think about that and that would complicate discussions of margins if your overall tax rate is going to come back 2, 3, 4, 5, 6, 700 basis points. that will certainly be a driver of margins. >> the list could get longer. >> it could get longer, right. >> not a bad thing. good to see you, david. >> thank you. coming up on the show, trump takes aim at boeing. we'll break down what the new administration means for business and much more with ambassador nicholas burns next.

plus, financials are certainly in focus. banks are among the top performing group -- they're the best performing group since the election. will it last? much more ahead on "squawk on the street." stay with us, with the dow down about 27 points here. my business was built with passion... but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. with it, i earn unlimited 2% cash back on all of my purchasing.

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expanded search for secretary of state. and then a public challenge from trump to boeing in its construction of air force one. first in a tweet this morning and then on camera. listen. >> the plane is totally out of control. it's going to be over $4 billion. it's for air force one program. and i think it's ridiculous. i think boeing is doing a little bit of a number. we want boeing to make a lot of money, but not that much money. okay, thank you. >> for more on trump's new style of negotiation with business and foreign governments, we're joined now by former u.s. ambassador and assistant secretary of state nicholas burns, now a professor of diplomacy and international relations at harvard's kennedy school of business. ambassador burns, good to see you again. >> good morning. >> what do you think the president-elect is trying to do here when it comes to boeing, first in a tweet and then making those comments? this is a totally different playbook, we're all trying to figure it out. >> i think he's trying to negotiate the price of the new

air force one. i don't blame him for that. you know, the u.s. government wants a good deal. but here's what i'd say to put it into a larger context. we traditionally have had one president at a time and in transitions, the incoming president-elect is usually a little bit muted, doesn't try to negotiate things in public with foreign governments or with american companies. he needs to get his team together, he needs to think of what his priorities are. i think he'd be better advised to do that. then after january 20th, he's going to have to hit the ground run, but i think trying to negotiate with boeing, making the phone call to the taiwan president, i just think it's a tactical mistake. you don't even have a secretary of state yet. you really need to get your policies in place and not try to begin to be president before january 20th. >> we're just going to interrupt you for one moment and take you to washington, d.c., where house speaker paul ryan is speaking along with the house majority leader, kevin mccarthy. let's listen in. >> than our foreign competitors tax theirs. therefore, they're winning and

we're losing. we're losing headquarters of companies because of our tax code. if you make money overseas, you can't even bring it back home to reinvest it because of our tax code. we think the real solution is comprehensive across-the-board tax reform which is what we're going to be hitting the ground running on. the guy with the beard. it's a good beard. >> you're jealous. >> i'm jealous. yeah, i had to shave mine. >> you mentioned the energy bill that's been in conference. i understand they were close to a deal on something very small. is that going -- >> the final decision has not been made but that has not gone as well as the other things that we're looking at. >> last question. kasie. >> is it prudent for the president-elect to call the president of taiwan. >> it's prudent for him to take

congratulatory calls. it is prudent for the president-elect to take congratulatory calls. i think there's a lot of much ado about nothing about this. i think for him to not take a congratulatory call would in and of itself be considered a snub so i think everything is fine. i'm not going to get into tweets. do you think i'm going to comment on the daily tweets? i'm not going to be doing that. thanks, everybody. appreciate it. >> house speaker paul ryan, wouldn't take the bait on tweets. did comment on the congratulatory call from taiwan to trump and a quick programming note. a lot more from house speaker paul ryan. he'll be joining "squawk box" tomorrow, 8:40 a.m. eastern time. we've got the right guest to talk about this, ambassador nick burns with us. on this question of taiwan and china, do you think that it was a premeditated choice from president-elect trump to have that conversation, and was he trying to send a message to china? >> well, that's what some of the

people in trump campaign are saying, that they considered this and they wanted to make this call to the president of taiwan. now, no american president has done that since before richard nixon. and it worked over the last 40 years. we had stability in our relations with china. we were clear that there was one china in beijing. we are competitive with that country, we disagree with china, but we're not trying to question the existence of whether there's one china or two. i think the problem with the phone call that president trump made is this, president-elect trump has also said that north korea is going to be one of his top concerns. we're going to need chinese cooperation to try to back the north koreans off their nuclear weapons stance. it's not the way to get china's cooperation on that or on climate change or global economic stabilization. so you have to make choices as president. i don't think it's smart for president-elect trump to begin his administration with a major crisis of confidence with china.

we'll oppose china on many issues, but i wouldn't start in early december before you've even become president. a tactical mistake. >> what do you think are going to be the ramifications of that? i would have some tweets where he called out china on currency manipulation. something that happens on a campaign trail but rarely happens once you win an election. >> we'll have to see. we need to be very tough-mindinged in the south china sea and east china sea. we should continue the rebalancing of american forces and build up american power in east asia. we should want to be the predominant power. at the same time, you've got a deal with china. here's where i think president-elect trump needs more experience around him. he needs a secretary of state nominee who can help him calculate the risks of angering the chinese on an issue like taiwan versus trying to get their cooperation on north korea. with great respect, and i respect speaker ryan very much, i don't agree.

george w. bush, ronald reagan, richard nixon, they weren't calling the taiwanese leadership because we had settled 43 years ago on this issue of china, one china, not two. big mistake to put that back into play. >> right. well, ambassador, the key point may endi up being, though, trad and jobs, which has certainly been a focus in the president-elect even since the short time since the election. what are your expectations on that front if this is a negotiating -- if this is a series of negotiations to get to something there? we've already been hearing so often about all the tariffs that are applied on chinese products when they're sold here -- excuse me, when u.s. companies sell their products there as opposed to very few when chinese products are sold here. >> i know some people have been saying over the last couple of days that donald trump was right to take the call from taiwan because it builds our leverage with china. i actually don't see how that works. i don't think it builds our leverage with china. i think it might freeze our

relationship with china on a number of issues. so i don't think it helps there, but i would agree with you that one of the big issues we've got to really get to the chinese on is their violation of intellectual property rights. they're not observing contracts of american companies in china. we've got to be tough-minding tt you've got to be smart how you go about it. >> we'll leave it there. nick burns, former u.s. ambassador and former deputy secretary of state as we continue to await the current choice for secretary of state out of trump tower. when we come back this morning, financials on a tear since the election. in fact jamie dimon making some interesting comments at a conference right now. how high will the bank stocks go? we'll discuss and bring you up to speed on dimon in just a moment.

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we've got some breaking news this morning. two key rulings out of the supreme court. let's get to hampton pearson in washington for the latest. >> first an important ruling on insider trading. the supreme court ruling on an insider trading case for the first time in two decades. basically is upholding the conviction of a chicago man in a decision that frankly could make it a lot easier to prosecute

people accused of profiting from confidential information. as we said in a unanimous decision, the court essentially says sharing corporate secrets with friends or relatives is illegal, even if the insider providing the tip doesn't receive anything of direct value in concern. the other important case, the samsung versus apple dispute over patent infringement. the court again deciding with samsung, throwing out the appeals court ruling that said samsung had to pay $399 million penalties to apple because of patent design issues. essentially what the court had to decide was whether a company could be required to pay all the profits of products it infringes on in an alleged patent design suit or limited only to some or a portion of that. the court essentially decided with samsung saying it should only be limited. that's important going forward because when you're looking, for

instance, at a complex consumer device like an iphone, there are lots of patented items inside that phone. that's important to other patent disputes that are also on the court docket for this term. back to you. >> hampton pearson, interesting cases. thank you so much. we'll talk to you soon. meanwhile financialing ts tp gainers in the post-trump market rally. just a few minutes ago we heard from b of a's brian moynihan. >> there's a lot of debate about what the right course forward is. we're self interested as an industry. we have an obligation through the fdic to pay the costs of cleanup so we want reasonable regulation. >> weighing in on the trump policy impact on financials, brennan hawkin. good to see you again. >> good morning. >> what a run we've been on. even as we were getting ready for this segment, jamie dimon says that at a certain price, they would consider a special

dividend over additional buybacks. is that a clue that we're getting into an expensive era? >> what it suggests is based upon the current earnings power of these companies, that they're not really sure about dividend versus buyback. the issue and what most financial investors and certainly i'm in this camp as well, is that the current moves and what we've seen in these stocks here over the last month, let's call it, since the election isn't about the current earnings power. it's about what's going to happen next year, it's going to be what happens when we have a less hostile regulatory regime in place and how much the earnings power can expand. those are theoretical at this point and, therefore, not really something that you can firmly model with a great deal of confidence. that probably gets to the question about where the debate is on the price for jp. >> how much empirical data or policy on paper do we need to start making reasonable assumptions about that stuff? >> well, there's a terrific

amount of empirical data, it just hasn't existed within the last, let's call it, six to eight years, right? we've recently been having a regulatory regime which has been hostile. the assumption generally has been that the traders involved in principal transactions facilitating clients were in the interests of proprietary trading and trying to hide proprietary trading through principal transactions. when you have the assumption coming in that there is something you need to be careful of, inappropriate transactions when people are just trying to facilitate customers, then you're not going to be able to tract as freely. now, if there is an assumption instead that these businesses are transacting on behalf of clients that are trying to facilitate capital markets, we're going to improve the liquidity and provide lubrication in the trading

businesses, revenue opportunities are going to improve and things are going to look a lot better. >> so for all of these reasons you raised your price target on a number of banks after the election. which ones still have some opportunity here for buyers that were on the sidelines of this amazing rally? >> yeah, so i continue to like goldman sachs and morgan stanley a great deal. b of a has plenty of upside as well. we are buyers of the investment banks broadly. we have buy ratings across the board. this dates back to february, when things were really awful. but i must say, one other thing jamie said in his comments at that conference was he's been surprised at the intensity and strength of this rally. i hear him on that front. i didn't think we would get this far this fast, but nonetheless i don't think it's unwarranted. i do understand the idea and given that we're using the rear-view mirror here of the last several years in order to gauge the earnings power, i think that's what's causing some of these stocks to look

expensive. when we raised our estimates, we are a full -- when you use our earnings numbers versus consensus, it's a full earnings pe multiple turn lower than you get with consensus. so i don't think they're as expensive as they look. >> that's good, brennan, appreciate that. we'll talk to you soon. brendan hawken, joining us over at ubs. let's go to sue herera who gives us a news update at this hour. >> good morning, everybody. here's what's happening at this hour. the death toll from the oakland warehouse fire on friday is going to remain at 36 for now. the manager of the warehouse appearing on the "today" show saying he was only trying to provide a place for struggling artists to live. >> i'm only here to say one thing, that i am incredibly sorry and that everything that i did was to make this a stronger, more beautiful community and to bring people together. people didn't walk through those doors because it was a horrible place. defense secretary ash carter

meeting with shinzo abe in tokyo. the two announcing the u.s. will give back to the japanese government nearly 10,000 acres of land on okinawa that the u.s. marines now use for jungle warfare training. aid good samaritan in china saved his neighbor's life by dragging a flaming gas tank out of a burning house to a nearby pond. he also dragged his badly burned neighbor out of the house and he is being hailed as a hero. rightfully so. that is the news update at this hour. sara, guys, back down to you. >> sue, thank you. when we come right back, productivity growth is dangerously close to stalling completely. that's according to our next guest, the ceo of the council of competitiveness. so can the new trump administration turn it around? we'll discuss, next. alpha seems more elusive today. is it because so many go after it the same way? chasing after short term returns. instead if getting caught up with the crowd, the investment managers at pgim take a long term view, teaming specialized active investing with risk-management rigor,

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new report from the business roundtable. i guess they're watching their stock prices. >> among other things. it brings together ceos with combined revenue of $6 trillion and it shows a rise in optimism in its fourth quarter report. this in part reflects the victory of president-elect donald trump with the survey conducted a bit before and a bit after the election. caterpill caterpillar's ceo, the chairman of the roundtable says the american business leaders are encouraged by president-elect trump's pledge to boost economic growth. we will work with the incoming administration and congress to enact pro-growth policies. he cited tax reform, education and smarter regulation, infrastructure and training as the types of policies the ceos will be seeking. significantly the ceos said for the fifth straight year that regulation is their business's top cost pressure followed by labor and health care. here are the results for the fourth quarter survey. index up by 4.6%.

it's still below the long run trend of 74.2. sales, the net sales index up by 4.5 points but capex down for the six-month outlook but jobs up strongly, 14.8, suggesting good hiring in the months ahead. now, a separate consumer survey from investors business daily released this morning finding that the six-month outlook -- there is the long-term outlook. you can see there down from the higher levels of first quarter 2015. meanwhile a separate report from investors business daily on consumer confidence surged to a nine-year high with republicans and independents becoming far more optimistic. that offset increased pessimism among democrats, sara. >> they have a lot to look forward to if congress and the president can deliver. steve, thank you. >> sure. speaking of the intersection of business and politics, president-elect donald trump tweeting this morning that the u.s. government should cancel its air force one order from boeing, doubling down on camera

at trump tower this morning. listen. >> the plane is totally out of control. it's going to be over $4 billion. it's for air force one program. and i think it's ridiculous. i think boeing is doing a little bit of a number. we want boeing to make a lot of money, but not that much money. okay, thank you. >> so from carrier to boeing. is this what we can expect from the future presidential negotiations with business and what does it all mean for the economy? joining us now from washington is president and ceo at the council on competitiveness. good to see you, debra, welcome. >> thank you. delighted to be here. >> so as someone who runs a group of ceos pushing for u.s. competitiveness, what's your reaction to trump going directly after boeing today in a tweet and on camera and the carrier deal, direct intervention from a president-elect in business? >> well, the u.s. council on competitiveness, as you know, that brings together ceos and university presidents and labor

leaders, we're very pro business and pro growth and we really believe the private sector needs to lead. so i think the comment about boeing is a little bit concerning in terms of the president, but on the other hand, there's so many exciting things under way in what we're hearing about from the trump transition team and the president-elect about how to get this economy growing again and very importantly how we're going to jump start our stagnant productivity and really ensure that we have a higher standard of living for all americans. and that's really where we're focused, sara. this friday you'll be with us in washington for our 30th anniversary. >> yes, i'm looking forward to it and a number of conversations we'll be bringing from ceos and major multi nationals. i've got to think, deborah, at the top of the list is deals like this, deal-making between a president and a company. what do you make of the carrier deal, the fact that there were incentives offered. surely as a group you guys are

looking forward to a lower corporate tax rates, but there were also some threats made. perhaps not directly to carrier, but president-elect trump afterwards saying there will be consequences for those companies that want to leave the u.s. in terms of jobs and then he tweeted 35% taxes at the border. >> well, i think those issues, you know, are really evolving right now, sara. from the perspective of the u.s. council on competitiveness, we have worked for so many years to make the business case for our manufacturing enterprise and the talent and the skills. so keeping this big infrastructure in the united states and ensuring that we're going to move to advanced manufacturing while at the same time we're going to educate our workers, this is very, very important. i think on the issue, though, about the potential looming of new tariffs and things like that, you know, some of that may be talk right now. some of the things bev been hearing back in the campaign but also now are really sending signals, i think, to the country

that president-elect trump is really, really serious about high quality jobs for america and building up our manufacturing and our surface infrastructure. >> at the same time, though, you're the ceo of the council of competitiveness an "the times dwts th" talks about whether the president-elect is on a perilous course with lawmakers who say they don't necessarily want a trade war. is that collision coming? >> well, i'm not sure if the collision is coming, but i do think that the -- most people in the country, and particularly business leaders, do not want a trade war. i mean trade has been very advantageous to the united states, but at the same time, you know, there's a big recognition that we have to have fair and balanced trade and we have to make sure that our trading partners are opening up their markets. i mean you look at parts of asia where we still don't sell any of our advanced products. at the same time, we're dealing with tremendous intellectual property theft, pernicious cyber

attacks, so we do have to change the debate on this and ensure it's not just a level playing field, but that u.s. companies and u.s. products are really accessed into these markets. >> so bottom line just to round it all up, deborah, your group along with gallup put out a report this week no recovery. it's very gloomy on lack of productivity growth and lack of economic growth. are you more optimistic, was that done before the election and has that completely changed the tone? >> well, this is a very significant report, sara, because it's looking really at 50 years of the decline in u.s. productivity. and what's very, very important coming out of this report, and i urge everyone to read it, is that we have three sectors in our economy, health care, education and housing, that account now for 35% of all economic activity and there is absolutely no productivity in these sectors.

and indeed there's a very deleterious effect. if the costs increase, the quality is not increasing. if we don't fix the quality of these three sectors making up, again, 36% of our economy, we will not see the long-term growth in productivity and standard of living that we need. also, very important in this report that involves tremendous work from gallup and the council on competitiveness, this drag -- there are the three drags in our economy. health care, education, housing. really are going to have a very negative impact on the next generation of entrepreneurs and innovators in america. >> all right, deborah. we've got to leave it there. a lot more discussion on these key issues for business, the economy and politics coming friday as i head down to the council of competitiveness forum. for now i'll leave it there. carl, we'll have a lot of

conversations with ceos from various industries. fedex, u.s. steel and many more. >> i cannot wait. as we go to break, take a look at shares of nike this morning. already the worst dow stock of the year down again today as the stock is downgraded from market perform to outperform saying the company could lose even more market share to the likes of adidas and under armour. the dow is down 13. we're back in a minute. this is my retirement. retiring retired tires. and i never get tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement with e*trade. i'm in vests and as a vested investor in vests i invest with e*trade, where investors can investigate and invest in vests...

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what companies and sectors may be the biggest beneficiaries of any corporate tax cut? find out at tradingnation.cnbc.com. more "squawk on the street" coming up.

welcome back. oil falls more than 2% today. it is still off its lows. the biggest movers, kindser morgan, devon energy, pioneer natural resources and marathon

oil. all of those are down more than 1% apiece. despite today's decline the sector did hit a new 52-week high and it does remain the best performer. it's up more than 27% this year. guys. >> thanks very much, morgan. let's send it over to rick santelli in chicago with the santelli exchange. rick. >> good morning and thank you, david. i'd like to welcome my aloha partner and tuesday guest, charles beaterman. good morning, charles. >> good morning to all. >> all right, listen, post election no secret we've seen a pretty nice rally in stocks led by financials and a continuation in the sell-off in treasuries pushing rates up. do the flows that you so accurately monitor reflect those trades and can you give us some granular detail? >> well, we've seen huge inflows into u.s. equity exchange traded funds, record inflow. the last time we saw this much money coming in was in the summer of '07 right before the major downdraft.

we also are seeing outflows from managed mutual funds, u.s. equity mutual funds, so money is going out of there and into passive. and on the passive side, we are seeing -- we have been seeing significant sums going into goi financial sector and energy etfs. but that seems to be slowing. we seem to have reached the top here, in my opinion. investors seem all in. we've seen massive inflows and they're all in. now we have a lot of headwinds ahead of us, before we get to the benefits or the hopeful benefits from trump-enomics. >> low-hanging fruit. he's going to be big pro energy. they've taken up the slack in the rope. now, just because funds seem to have peaked, does that mean we see a correction or do we see a pause in consolidation or no way

to tell? >> well, i really think that we have massive headwinds. high erinterest rates has to hurt the housing market. we're seeing mark hanson says the cost to buy a new home today, given the higher down payment required, is higher than it was at the peak of the market in '07. we're seeing slumps in new york, miami, in california. the housing market has -- is starting to slow. and 4% plus mortgage rates are really going to slow things. higher interest rates also are not -- and higher oil costs are not going to help the automobile industry, which also seems to be peaking a bit. also there's a lot of evidence that the sub-prime auto loans are starting to crater. then there's the higher dollar which is hurting global. >> yes. that's what i wanted to talk about, the dollar. is there too much concern regarding multinationals?

is this going to be real? is it more than just a strategic investment change? >> well, obviously, if the dollar goes up and the money that international companies, u.s. companies own overseas goes down automatically, it's an automatic haircut. but also the worst impact on the dollar is on the merging market economies, which also have to slow. you have slowing emerging markets, slowing housing, slowing autos. and we have the possibility that higher -- less regulation and lower taxes and infrastructure build will help. but that's far away from now. i mean, that's if, as and when. it's not going to happen for several months. my prediction, my guess is -- >> john, we'll have to leave it there. i know what your prediction is. we might have gotten ahead of ourselves and everybody, of course, needs to monitor that. thank you for your opinions, especially on flows. david faber, back to you.

>> thank you very much. rick santelli. let's get to the news, a news break now or break -- the news, we're going to do right now, which is -- a bit of analysis on this supreme court decision we received shortly. hampton pierce giving us the actual news. fallout from it may result in the u.s. attorney from the southern district of new york having a rather good day. people may want to go back to a where mr. bharara lost, todd newman and anthony chasin, specific to insider trading that had been alleged in stocks in both dell and nvidia. the idea of a remote tippee insider trading case. these gentlemen were so far removed from the initial

exchange of inside information and were not even aware if there was any personal benefit given to the person who relayed that information that they were not liable for insider trading. today's case in the supreme court, not involving those two gentlemen, nonetheless upheld a previous supreme court decision, important one called dirks in which basically they said you can infer that there was some sort of benefit in this case, the case that they upheld that the ninth circuit actually ruled in favor of the government for. and, therefore, it's seen as upholding at least what had been previous doctrine in insider trader law in that it is not up to those who are prosecuting to prove that there was a specific benefit. that at least you can infer a gift of information to relative, as in this supreme court case, is enough. that may embolden mr. bharara

and help them in their prosecution of insider trading, sarah. i know it's complex. people are analyzing this who know much more about this than i do. newman and chasin people remember very well from the barrage of insider trading and process kougss that went on. >> now we know he will stay on the job because he came in and out of that trump tower meeting last week. >> that's right. >> mr. bharara. goldman sachs conference, jamie dimon, ceo of jp morgan. wilfred frost has been covering that all morning. >> yes, indeed. let's bring the headlines on what jamie dimon has been saying. in particular dodd/frank, he's not looking for wholesale changes but that bill was partisan. what's needed now is bipartisan and national look at it.

specifically the vulker rule had moved liquidity going forward. he wants regulation to be more prescriptive with more hard and fast rules. in general his comments a little stronger in terms of what he wants changed than the likes of tim sloane, brian mornahan but overall they were similar, saying they're not expecting wholesale changes. jamie dimon says the consumer was very good and he will welcome and, in fact, the u.s. needs corporate tax reform. trading, don't forget this is the area where sector as a whole beat earnings reports in q3, trading up 13% year on year. the fixed interest returns were improving. that was positive. in terms of what was most positive, according to one hedge fund analyst overall was his bullish comments on how sensitive the company was to the yield curve, saying that the 10k numbers were too low and that

that was an area, one investor said, was particularly positive. back to you. >> thank you very much. as we head to break, quick programming note. under armor signing a deal with major league baseball for the next ten years. we'll speak exclusively with kevin plank and mlb commissioner rob manfred tomorrow right here 10:00 am eastern time on squawk on the street.

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let's round out the hour with a quick market check for you. dow is down 10 points. nike is the biggest weight. nasdaq outperforms but just barely. mini rallies, not even, for the nasdaq and s&p. if the nasdaq outperforms that would be the second day in a row after 1% higher yesterday. can carl? >> good morning. it's 8:00 10:00 at at boeing headquarters in chicago. it's 11:00 am on wall street. "squawk alley"